Goldman downgrades beer stocks because millennials like wine better

Data shows that beer penetration across the United States fell in 2016 while wine and spirits held steady.

The report also noted that millennials are not consuming as much alcohol as prior generations.

Goldman Sachs downgraded the Boston Beer Company and Constellation Brands due to sluggish beer sales and shifts in demographic tastes. As it turns out, younger generations are drinking more wine and less beer.

“As we explored back in 2014, we expected a cyclical rebound in total alcohol consumption post-recession ,” wrote chief analyst Freda Zhuo in Monday’s note. “The cause [for shifts in beer and wine market penetration] is younger groups shifting away from beer.”

After the first hour of trade on Monday, shares of Boston Beer were down 5 percent, while shares of Constellation slipped nearly 1 percent.

Goldman not only suggests that young drinkers aren’t consuming as much alcohol as previous generations did, but they also observed that millennials are trading beer for wine and spirits.

“We view the shift in penetration and consumption trends as driven by a shift in preferences in the younger cohorts,” added Zhuo. “The youngest demographic (<35 year olds) overall penetration rates are not increasing. The 35-44 year old cohort shows a shift away from Beer to Wine & Spirits.”

Nielsen panel data showed that beer penetration across the United States is 25 percent year to date versus 26 percent in 2016 according to Nielsen panel data. Wine and spirits’ penetration was stable at 23 percent and 14 percent respectively.

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